Item 6FCITY OF
SOUTH LAKE
MEMORANDUM
August 10, 2011
To: Shana Yelverton, City Manager
From: Sharen Jackson, Finance Director
Subject: Ordnance No. 1011, 2 nd Reading, Approving a negotiated
resolution between the Atmos cities steering committee ( "ACSC" or
"Steering Committee ") and Atmos Energy Corp., Mid -Tex Division
( "Atmos MIDTEV or "company ") regarding the company's fourth
annual rate review mechanism ( "RRM ") filing in all cities exercising
original jurisdiction; declaring existing rates to be unreasonable;
adopting tariffs that reflect rate adjustments consistent with the
negotiated settlement and finding the rates to be set by the
attached tariffs to be just and reasonable; requiring the company to
reimburse cities' reasonable ratemaking expenses;
Action
Requested: Approval of Ordinance No. 1011.
Background
Information: Southlake, along with approximately 154 other cities served
by Atmos Energy Mid -Tex Division ( "Atmos "), is a member of
the Atmos Cities Steering Committee ( "ACSC "). On April 1,
2011, Atmos filed with the City an application to increase
natural gas rates. This is the fourth annual Rate Review
Mechanism ( "RRM ") filing. The Atmos RRM filing sought a
$15.7 million rate increase. The City worked with ACSC to
analyze the schedules and evidence offered by Atmos to
support its request to increase rates.
As a result of the negotiations, ACSC was able to reduce the
Atmos' requested $15.7 million increase to $6.6 million,
allowing only incremental revenues necessary to cover direct
costs associated with the steel service line replacement
program approved by ACSC Cities in 2010 (Ordinance 984
approved October 5, 2010). Approval of this Ordinance
1011 will result in the implementation of new rates that
increase Atmos' revenues effective September 2011. The
average residential customer (using 4.5 Mcf a month) will
have an increase of $0.31 per month or .66% and the
average commercial customer (using 34.8 Mcf a month) will
have an increase of $0.88 per month or 0.88 %.
During the time that the City has retained original jurisdiction
in this case, the consultants working on behalf of ACSC
have investigated the support for Atmos' requested rate
increase. While the evidence does not support the $15.7
million increase requested by the Company, ACSC
consultants agree that the Company can justify an increase
in revenues of $6.6 million, a result consistent with
Southlake's approval of a steel service line replacement
program last year (Ordinance 984 approved October 5,
2010). The agreement on $6.6 million is a compromise
between the positions of the parties.
The Settlement Agreement of 2010 (Ordinance No. 984
approved October 5, 2010) which included an extension of
the RRM process, included an allowance for recovery of
direct costs, excluding overheads, of the steel service line
replacement program. The 2010 Settlement Agreement
contemplated that the steel service line replacement
program would be adjusted annually, but shall be capped at
$0.44 for residential customers and $1.22 for commercial
customers per month. The increase in this case is
consistent with the caps contemplated last year for the steel
service line replacement program.
The alternative to a settlement of the filing would be a
contested case proceeding before the Railroad Commission
on Atmos' current application, would take several months
and cost ratepayers millions of dollars in rate case expenses
and would not likely produce a result more favorable than
that to be produced by the settlement. The ACSC
Settlement Committee recommends that ACSC members
take action to approve the Ordinance authorizing new rate
tariffs.
Financial
Considerations: None
Strategic Link: F1 Adhere to financial management principles and budget
Citizen Input/
Board Review: Public Hearing scheduled for September 6, 2011.
Legal Review: Ordinance prepared by Steering Committee attorneys, Lloyd
Gosselink Rochelle & Townsend, P.C.
Alternatives: Deny Ordinance
Supporting
Documents: Ordinance No. 1011
Tariff (Attachment A)
Staff
Recommendation: Approve Ordinance No. 1011
ORDINANCE NO. 1011
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF SOUTHLAKE, TEXAS, ( "CITY ") APPROVING A
NEGOTIATED RESOLUTION BETWEEN THE ATMOS
CITIES STEERING COMMITTEE ( "ACSC" OR
"STEERING COMMITTEE") AND ATMOS ENERGY
CORP., MID -TEX DIVISION ( "ATMOS MID -TEX" OR
"COMPANY ") REGARDING THE COMPANY'S FOURTH
ANNUAL RATE REVIEW MECHANISM ( "RRM") FILING
IN ALL CITIES EXERCISING ORIGINAL JURISDICTION;
DECLARING EXISTING RATES TO BE
UNREASONABLE; ADOPTING TARIFFS THAT REFLECT
RATE ADJUSTMENTS CONSISTENT WITH THE
NEGOTIATED SETTLEMENT AND FINDING THE RATES
TO BE SET BY THE ATTACHED TARIFFS TO BE JUST
AND REASONABLE; REQUIRING THE COMPANY TO
REIMBURSE CITIES' REASONABLE RATEMAKING
EXPENSES; REPEALING CONFLICTING RESOLUTIONS
OR ORDINANCES; DETERMINING THAT THIS
ORDINANCE WAS PASSED IN ACCORDANCE WITH
THE REQUIREMENTS OF THE TEXAS OPEN MEETINGS
ACT; ADOPTING A SAVINGS CLAUSE; DECLARING AN
EFFECTIVE DATE; AND REQUIRING DELIVERY OF
THIS ORDINANCE TO THE COMPANY AND THE
STEERING COMMITTEE'S LEGAL COUNSEL.
WHEREAS, the City of Southlake, Texas ( "City ") is a gas utility customer of Atmos
Energy Corp., Mid -Tex Division ( "Atmos Mid -Tex" or " Company "), and a regulatory authority
with an interest in the rates and charges of Atmos Mid -Tex; and
WHEREAS, the City is a member of the Atmos Cities Steering Committee ( "ACSC" or
"Steering Committee "), a coalition of approximately 154 similarly situated cities served by
Atmos Mid -Tex that have joined together to facilitate the review of and response to natural gas
issues affecting rates charged in the Atmos Mid -Tex service area (such participating cities are
referred to herein as "ACSC Cities "); and
WHEREAS, pursuant to the terms of the agreement settling the Company's 2007
Statement of Intent to increase rates, ACSC Cities and the Company worked collaboratively to
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develop a Rate Review Mechanism ( "RRM ") tariff that allows for an expedited rate review
process controlled in a three -year experiment by ACSC Cities as a substitute to the current GRIP
process instituted by the Legislature; and
WHEREAS, the City took action in 2008 to approve a Settlement Agreement with Atmos
Mid -Tex resolving the Company's 2007 rate case and authorizing the RRM Tariff, and
WHEREAS, the 2008 Settlement Agreement contemplates reimbursement of ACSC
Cities' reasonable expenses associated with RRM applications; and
WHEREAS, the Steering Committee and Atmos Mid -Tex agreed to extend the RRM
process in reaching a settlement in 2010 on the third RRM filing; and
WHEREAS, on or about April 1, 2011, the Company filed with the city its fourth annual
RRM filing, requesting to increase natural gas base rates by $15.7 million; and
WHEREAS, ACSC coordinated its review of Atmos Mid -Tex's RRM filing by
designating a Settlement Committee made up of ACSC representatives, assisted by ACSC
attorneys and consultants, to resolve issues identified by ACSC in the Company's RRM filing;
and
WHEREAS, independent analysis by ACSC's rate expert concluded that Atmos Mid -Tex
is unable to justify an increase over current rates except for undisputed costs of $6.6 million to
cover the steel service line replacement program initiated in 2010; and
WHEREAS, the ACSC Settlement Committee, as well as ACSC lawyers and consultants,
recommend that ACSC Cities approve the attached rate tariffs ( "Attachment A" to this
Ordinance), which will increase the Company's revenue requirement by $6.6 million to extend
current recovery of incremental direct costs of the steel service line replacement program
authorized by ACSC Cities in ordinances passed in 2010; and
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WHEREAS, the attached tariffs implementing new rates are consistent with the
negotiated resolution reached by ACSC Cities and are just, reasonable, and in the public interest.
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY
OF SOUTHLAKE, TEXAS:
Section 1. That the findings set forth in this Ordinance are hereby in all things approved.
Section 2. That the City Council finds the existing rates for natural gas service provided
by Atmos Mid -Tex are unreasonable and new tariffs which are attached hereto and incorporated
herein as Attachment A, are just and reasonable and are hereby adopted.
Section 3. That Atmos Mid -Tex shall reimburse the reasonable ratemaking expenses of
the ACSC Cities in processing the Company's rate application.
Section 4. That to the extent any resolution or ordinance previously adopted by the
Council is inconsistent with this Ordinance, it is hereby repealed.
Section 5. That the meeting at which this Ordinance was approved was in all things
conducted in strict compliance with the Texas Open Meetings Act, Texas Government Code,
Chapter 5 51.
Section 6. That if any one or more sections or clauses of this Ordinance is adjudged to be
unconstitutional or invalid, such judgment shall not affect, impair or invalidate the remaining
provisions of this Ordinance and the remaining provisions of the Ordinance shall be interpreted
as if the offending section or clause never existed.
Section 7. That this Ordinance shall become effective from and after its passage with
rates authorized by attached Tariffs to be effective for bills rendered on or after September 1,
2011.
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Section 8. That a copy of this Ordinance shall be sent to Atmos Mid -Tex, care of David
Park, Vice President Rates and Regulatory Affairs, at Atmos Energy Corporation, 5420 LBJ
Freeway, Suite 1862, Dallas, Texas 75240, and to Geoffrey Gay, General Counsel to ACSC, at
Lloyd Gosselink Rochelle & Townsend, P.C., P.O. Box 1725, Austin, Texas 78767 -1725.
2011.
PASSED AND APPROVED on first reading this day of ,
John Terrell, Mayor
ATTEST:
Alicia Richardson
City Secretary
PASSED AND APPROVED on second reading this day of
2011.
John Terrell, Mayor
ATTEST:
Alicia Richardson
City Secretary
APPROVED AS TO FORM:
City Attorney
Date:
Adopted:
Effective:
1327084 /Atmos Mid -Tex RRM -4 Ordinance 4